Intellectual Property

When it comes to football, I am a huge fan and love watching games on TV.  However, I do not typically pay attention to the commercials during games, with one major exception:  the Super Bowl.  Like most everyone, I am always curious to see which company will have the best and the worst Super Bowl commercials.  We always expect Anheuser-Busch (maker of Bud Light) and Molson Coors (maker of Miller Lite and Coors Lite) to bring out big gun ads.  After all, for many football fans, a game day means grabbing a beer (or several), so companies spend a lot of money to convince fans to grab their brands over others.  The competition rose to a new level in Super Bowl LIII when Anheuser-Busch introduced its ad campaign mocking Molson Coors’ use of corn syrup in brewing Miller Lite and Coors Lite.  These ads not only triggered a social media battle but also a battle in the courtroom over whether the Bud Lite ads constituted false or misleading advertising.

During the 2019 Super Bowl, Anheuser-Busch started its “corn syrup” ad campaign with an ad featuring the Bud Light King and his subjects trying to return a barrel of corn syrup, which they had received by mistake, to the Miller Light and Coors Light castles.  The ad effectively told a story that Anheuser-Busch does not use corn syrup to make Bud Light, but Molson Coors uses it to make Miller Lite and Coors Lite.

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The case of Egenera, Inc. v. Cisco Systems, Inc. raised the question of whether inventors named on a patent can be repeatedly changed as litigation strategy changes. Because of judicial estoppel, the district court said no way.  But, on appeal, the Court of Appeals for the Federal Circuit said no problem—at least no problem in this case.

Mr. Shulter was listed as an inventor on Egenera, Inc.’s (“Egenera”) patent application and the resulting patent, U.S. Patent No. 7,231,430 (the “’430 Patent”).  The ‘430 patent relates to “a platform for automatically deploying a scalable and reconfigurable virtual network” of processors.  The claimed approach alleviates the need for physical reconfiguration of processors by allowing “processing resources [to] be deployed rapidly and easily through software.”

In 2016, Egenera sued Cisco Systems, Inc. (“Cisco) alleging Cisco’s enterprise server systems infringed the ‘430 patent.  In response, Cisco challenged the validity of the patent’s claims in a petition for inter partes review (“IPR”).   Cisco’s IPR petition included the “Grosner” prior art.   In an attempt to overcome “Grosner,” Egenera claimed an earlier conception date for invention in its response to the IPR.  However, that earlier conception date predated Egenera’s hiring of Mr. Shulter, who had been listed as an inventor.  Egenera attempted to reconcile this dilemma, explaining that after reviewing the IPR petition, it realized “all claims had been conceived before … Mr. Shulter, had started working there,” so he could not be an inventor. Then Egenera asked the United States Patent and Trademark Office (“USPTO”) to remove Mr. Shulter from the patent.  The USPTO granted the request.

After Mr. Shulter was removed as an inventor, the district court construed the ‘430 claims.  The district court “issued an order construing the patent’s ‘logic’ terms as means-plus-function elements.” Means-plus-function elements are limited to the structure disclosed in the specification.  In this case, that structure was a “tripartite structure.”  Cisco argued that Mr. Shulter invented the tripartite structure, and therefore, the patent was invalid because it did not correctly list all of the inventors. The district court agreed.  In response, Egenera changed its strategy and tried to add Mr. Shulter back as an inventor of the ‘430 Patent.  The district court ruled that judicial estoppel prevented “’resurrecting Mr. Shulter’s inventorship.”  Egenera appealed.

Under 35 U.S.C. § 256, errors in the list of inventors of a patent can be corrected either through a petition to the Director of the USPTO or by order of a court.  The Federal Circuit stated that “error” in this context “is simply an incorrect listing of inventors” irrespective of whether the list is incorrect due to honest or dishonest mistakes.  In other words, omitted inventors can be added and wrongly included inventors can be removed.  The statute further states that the error “shall not invalidate the patent in which such error occurred if it can be corrected.”  On appeal, the Federal Circuit determined that “Egenera’s assertion in its inventorship petition [to the USPTO] was incorrect:  Mr. Schulter was an inventor.  According, we conclude that Mr. Schulter’s omission was ‘error.’”

The Federal Circuit then turned to the question of whether judicial estoppel prevented correction of the inventorship error.  “Judicial estoppel prevents a party from taking a position in litigation that is inconsistent with a position successfully taken in a prior legal proceeding.  The purpose behind this doctrine is to preserve the integrity of legal proceedings.  The applicable standard here is that applied by the First Circuit, which evaluates three factors:

(1) whether a party’s earlier and later positions are “clearly inconsistent,” — that is, “mutually exclusive”;

(2) whether the party “succeeded in persuading a court to accept” the earlier position; and

(3) whether the party would “derive an unfair advantage or impose an unfair detriment” on the other side if not estopped.

While the district court found all three factors had been met, the Federal Circuit disagreed.

Addressing the first factor, the Federal Circuit stated that “[t]o be ‘clearly inconsistent,” positions must be ‘mutually exclusive’ and ‘directly inconsistent.”  Considering the present facts, the Federal Circuit stated “[w]e do not think that multiple corrections under § 256 are per se ‘mutually exclusive.’  In any event, the district court’s intervening claim-construction and inventorship determinations further justify any seeming inconsistency.” Egenera’s request to remove Mr. Shulter as an inventor was consistent with its preferred claim construction.  Once Egenera lost its claim construction position, “it was entirely consistent for Egenera to request an accompanying formal correction of inventorship” to add Mr. Shulter back as an inventor.  Therefore, because of the “intervening claim construction,” Egenera had not taken “clearly inconsistent” or “mutually exclusive” positions.

Evaluating the second factor, the Federal Circuit analyzed whether Egenera had “succeeded in persuading a court to accept” its earlier position.  Egenera’s petition to the USPTO to delete Mr. Shulter did not contain any statement of facts, but rather just a statements that it was an error to list Mr. Shulter and that all the other inventors agreed.  The USPTO does not perform a substantive examination of such petitions, but just checks “for the presence of supporting statements and the required fee.”  Therefore, the Federal Circuit stated that such a petition to the USPTO for change of inventorship is not sufficient to serve as “’persuasion’ of a ‘court’ for judicial estoppel purposes.”

As to the third judicial estoppel factor, the Federal Circuit determined Egenera did not gain unfair advantage nor would Cisco suffer unfair prejudice as the result of Egenera’s earlier position that Mr. Shulter was not an inventor.  Although Egenera had taken the position that Mr. Shulter was not an inventor to gain an advantage in the IPR, the IPR petition was denied before the change in inventorship was approved by the USPTO.  Further, the IPR petition was denied without addressing Egenera’s arguments relating to the priority date of the ‘430 patent.  Notably, the Federal Circuit stated that “[t]hings might be different had Egenera succeeded in swearing behind the prior art….But that is not this case.”

As a result, Federal Circuit found “the district court abused its discretion by applying judicial estoppel, vacated the invalidity judgement, and remanded the case for further proceedings.

A new temporary pilot program in the US PTO will speed up appeals in patent applications before the Patent Trial and Appeal Board (PTAB). The program, which went into effect on July 2, 2020, is called the “Fast Track Appeals Pilot Program.” The program is limited to 125 appeals per quarter.

The PTO instituted the pilot program because of the popularity of its Track I Prioritized Examination Program for patent applications. Under that program, an applicant can petition the PTO for expedited prosecution when filing a new application by paying an extra fee and limiting the number of claims. The Track I program is limited to 12,000 applications per year, and has been very successful. In 2019, 2.7% of the applications filed were under the Track I program.

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In Kirk Kara Corp. v. Western Stone & Metal Corp. et al, 2-20-cv-01931 (CDCA 2020-08-14, Order) (Dolly M. Gee), the Central District of California denied Defendant’s motion to dismiss Plaintiff’s claims for copyright infringement, finding sufficient substantial similarity between the copyrighted works and the accused works had been alleged. However, the Court granted Defendant’s motion to dismiss Plaintiff’s DMCA § 1202 claim because plaintiff failed to allege Defendant’s works were exact copies of Plaintiff’s, thus reasoning substantial similarity was not sufficient under the DMCA because DMCA violations exist only where the works are identical.

In the case, Plaintiff Kirk Kara Corp. asserts it is the owner of three registered copyrights for jewelry designs (“Subject Designs”), and alleges they were widely disseminated in the jewelry industry. Plaintiff further alleges that Defendant Western Stone and Metal Corp., doing business as Shane Co., distributed and/or sold four engagement rings (“Subject Products”) that are substantially similar to Plaintiff’s copyrighted jewelry designs. Plaintiff alleged copyright infringement, vicarious copyright infringement, contributory copyright infringement, and a violation of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1202 against Defendant. Defendant moved to dismiss all claims.

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The facts in Mango v. BuzzFeed are fairly straight forward. Mango is a freelance photographer who licensed a photograph to the New York Post.  The Post included the photo in a story and below the photo included Mango’s name – an attribution known in the publishing industry as a “gutter credit”.  Three months after the story was published by the Post, BuzzFeed published a related story and included Mango’s photo.  BuzzFeed did not get permission from Mango to use the photo.  Further, BuzzFeed removed Mango’s name from the gutter credit.  Mango sued for copyright infringement and for removal or alteration of copyright management information under the DMCA.  Prior to trial BuzzFeed stipulated to liability on the copyright infringement claim, leaving Mango’s DMCA claim as the sole issue for the District Court

Congress enacted the DMCA in 1998 to strengthen copyright protection in the digital age.  One part of the DMCA made unlawful certain acts that tended to be ancillary to acts of online copyright infringement, including to the circumvention of measures that control access to copyrighted works.  The DMCA also created the framework for what is commonly referred to as a “copyright takedown” and provided a safe harbor for Internet service providers against copyright infringement provided they comply with specific statutory requirements.

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The California Supreme Court in the 2008 case, Edwards v. Arthur Andersen LLP, ruled that a provision in an employment agreement that prevented an employee from competing with his former employer following the termination of his employment was an invalid restraint on trade in violation of section 16600 of the California Business and Professions Code.  The Court held that subject to certain statutory exceptions, i.e., to protect the value of goodwill in connection with the sale of one’s business interest, section 16600 invalidated all contractual provisions that constituted a restraint on an employee’s ability to practice his or her trade or profession.  What the Court has not addressed since that 2008 decision was whether provisions that acted as a restraint on trade in business contracts (i.e. exclusive distribution agreements, franchise agreements, etc.) would suffer a similar fate.    On August 3, 2020, the California Supreme Court issued its decision in Ixchel Pharma, LLC v. Biogen, Inc., and ruled that non-compete provisions in business to business contracts were not per se invalid, but rather subject to a rule of reasonableness.

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Imagine litigating an infringement case for two years, and after a nine day jury trial, obtaining a jury’s verdict that says you’ve established infringement and awards your client $5,000,000.  Then you realize that the jury has awarded your client $0 in actual damages, and the entire $5,000,000 sum is for punitive damages.  The Ninth Circuit in an unpublished opinion in Monster Energy Company v. Integrated Supply Network, LLC (July 22, 2020), reiterated that a party is not entitled to punitive damages without a finding of actual damages.

Monster Energy Company is a well-known energy drink giant that does a lot of sponsorship in the motorsports area with its distinctive green M logo.  In 2017, it sued Integrated Supply Network for infringement of its Monster marks.  Integrated Supply is a Florida automotive-supply company that sold various Monster Mobile and ISN Monster lines of goods that Monster Energy Company claimed infringed on its marks.

In November 2018, after a nine day jury trial, Monster Energy Company received a favorable jury verdict that found that ISN had infringed on some of its marks and trade dress, that the infringement was not willful and awarded Monster Energy Company $0 in actual damages. The jury found, however, that Monster Energy Company was entitled to $5,000,000 in punitive damages.  After post-trial motions, the trial court, perhaps in an attempt to fix this defect, awarded Monster Energy Company $1 in nominal damages in addition to the $5 Million in punitive damages.

Both sides appealed various rulings by the trial court to the Ninth Circuit.  This article will focus only on the issue of the interplay between actual damages and punitive damages.

Monster Energy Company appealed the denial of its motion for new trial on actual damages by claiming that the jury’s verdict awarding $0 in actual damages was not supported by the evidence.  The Ninth Circuit rejected this argument and concluded that the “verdict reflects the jury’s determination that [Monster Energy Company] failed to carry its burden of proving the amount of damages if any.”  The Ninth Circuit continued by further rejecting an argument that the award of $5,000,000 in punitive damages showed that the jury must have made a mistake with regard to its finding of $0 in actual damages.  The Ninth Circuit reasoned, “[a]ny tension between the jury’s punitive and actual damages awards does not lead to the conclusion that the actual damages verdict had no reasonable basis.”  Thus, the Ninth Circuit affirmed the lower court’s denial of Monster Energy Company’s motion for a new trial on the issue of actual damages.

The Ninth Circuit later turned its attention to Integrated Supply’s appeal of its motion to vacate the punitive damages award, which was denied by the trial court.  The Ninth Circuit held that the jury’s findings of $0 in actual damages precluded an award of punitive damages to Monster Energy Company: “Because ‘actual damages are an absolute predicate for an award of exemplary or punitive damages’ in California and the jury awarded $0 in actual damages, the punitive damages award should have been vacated.”

The Ninth Circuit continued by recognizing that the trial court’s attempt to fix the issue by awarding $1 in nominal damages to Monster Energy Company was not proper.  The Ninth Circuit concluded, “Moreover, although an award of nominal damages may be mandatory in a 42 U.S.C. §1983 in some circumstances [i.e. civil rights actions], the district court erred in overriding the jury’s $0 damages verdict and awarding $1 in nominal damages in this case.”  The Ninth Circuit ordered that the award of nominal and punitive damages be vacated.  However, given that the Ninth Circuit was remanding the case for the trial court to address other issues raised by Monster Energy Company, specifically its unfair competition law claim and its Lanham Act disgorgement claim, there could be a later basis for an award of punitive damages.  Nevertheless, that would be up to the trial court to determine after further litigation between the parties.

The result in the Monster Energy Company case is a reminder that plaintiffs in infringement actions must focus on establishing actual damages if they have any hope of holding on to an award of punitive damages.  Otherwise, the time and expense incurred in litigating for a number of years could all be for naught.

An unpublished decision from the Northern District of California emphasizes how important it is for attorneys to follow patent local rules.

Patent local rules are rules that many federal district courts have for patent infringement cases. These rules supplement the regular local rules for that court and the Federal Rules of Civil Procedure, and allow the courts that have a lot of patent infringement cases to more efficiently manage those cases. Patent local rules are also helpful to the parties and their counsel, as they provide a standard structure and some certainty to the litigation process.

Patent local rules usually include due dates for the plaintiff to disclose its infringement contentions and the defendant to disclose its invalidity contentions; whether a Markman hearing needs to be held, and if so, what terms need to be construed, the due date for the parties to propose claim terms and to exchange claim constructions, and the date of the Markman hearing; and whether the court or the parties will have technical experts testifying at the Markman hearing. The Northern District of California has long had patent local rules that address all of these issues and more. In most courts, the patent local rules provide that the parties may modify the rules with approval of the district court judge.

If a party fails to follow the patent local rules, the rules may provide that the district court may sanction the party, including by striking the contentions, or, in more serious cases, striking claims. That is exactly what happened in Xiaohua Huang v. MediaTek USA, Inc., 2020 U.S. App. LEXIS 17482. It’s hard to believe that such a case would make it all the way to the Federal Circuit, but it did.

In MediaTek, a patent owner in pro per filed a suit in the Northern District of California for patent infringement against defendant MediaTek. The patents-in-suit were two patents for memory technology used in semiconductor chips. The patent owner served infringement contentions before the case management conference was held. At the case management conference, MediaTek told the court that the contentions were premature and improper. The court informed the patent owner that he would have to follow the patent local rules or risk the case being dismissed.

Twice more, the patent owner served the same infringement contentions on the defendant, despite MediaTek offering to allow the patent owner time to amend. After the third set of deficient infringement contentions, MediaTek moved to strike the contentions as not compliant with the patent local rules and to dismiss the action with prejudice.

The district court granted MediaTek’s motion, but provided the patent owner leave to amend the infringement contentions, and again warned the patent owner that non-complaint contentions would likely result in a dismissal of the case with prejudice. The patent owner served a fourth set of infringement contentions, containing the same defects as the prior sets. The district court again found the contentions insufficient, and, this time, dismissed the case with prejudice.

On appeal, the Federal Circuit Court of Appeals affirmed the district court’s decision. The court explained that the patent owner’s infringement contentions were defective because thr claim chart did not tie the claim limitations to the features of the accused products, but instead tied the claim limitations to the drawings in the patent itself. The patent owner also failed to set forth the contentions with the required specification. Thus, the contentions were not proper and did not comply with the patent local rules.

The court explained that it “gives broad deference” to the district court’s patent local rules whose purpose was to help the district court manage its cases. The court held that the district court had not abused its discretion in striking the infringement contentions after the patent owner had repeatedly failed to correct the deficiencies in the contentions. The appellate court further held that the district court had not abused its discretion in dismissing the case.

In f’real Foods, LLC et al v. Hamilton Beach Brands, Inc. et al, 1-16-cv-00041 (DDE 2020-07-16, Order) (Colm F. Connolly), plaintiffs freal Foods, LLC and Rich Products Corporation sued defendants Hamilton Beach Brands, Inc. and Hershey Creamery Company for infringement of four patents on four accused products that are high performance blenders manufactured by Hamilton Beach. After a four-day jury trial, the jury found that all four accused products infringed various claims of the asserted patents, and that none of the asserted patents are invalid. The Court then turned to the plaintiffs’ motion for a permanent injunction.

The Court first noted that a plaintiff seeking a permanent injunction must demonstrate the four eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388,391 (2006) factors: “( 1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and ( 4) that the public interest would not be disserved by a permanent injunction.” To satisfy the irreparable injury factor, a patentee must establish ( 1) that absent an injunction it will suffer irreparable injury and (2) that a sufficiently strong causal nexus relates the injury to the infringement. The Court also noted that the Supreme Court has cautioned lower courts that “[a]n injunction is a drastic and extraordinary remedy, which should not be granted as a matter of course” and when “a less drastic remedy … [is] sufficient to redress [ a plaintiffs] injury, no recourse to the additional and extraordinary relief of an injunction [is] warranted.”

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On Monday, July 13, 2020, the ownership group of the Washington Redskins (the “Team”) announced that it will abandon the Redskins team name after nearly 30 years of controversy. The decision, despite what the Team says, is likely the product of societal pressure, which was reinforced by powerful corporations, such as Nike and Amazon, that refused to sell Redskins merchandise because of the Team’s disparaging moniker. Within days of the corporations refusing to sell their merchandise, the Team announced that it would undertake a “thorough review” of its name. Just over a week later, the Redskins announced that the name would be “retire[d].” But before you give the Team too much credit, let’s consider what it took to get here.

It all started with a decades-long battle between Native Americans and the Team. In 1992, Suzan Shown Harjo, president of the Morning Star Institute, and six other prominent Native Americans petitioned the USPTO’s Trademark Trial and Appeal Board (“TTAB”) to cancel the Washington Redskins trademark registrations. The petitioners argued that the marks are “disparaging, scandalous, contemptuous, or disreputable” and therefore not entitled registration. The legal war was waged for seven years before the TTAB judges agreed to cancel the registrations “on the grounds that the subject marks may disparage Native Americans and may bring them into contempt or disrepute.” The victory was, unfortunately, short-lived. The ownership group appealed the decision to the United States District Court for the District of Columbia, and the decision was reversed, citing insufficient evidence of disparagement. Later appeals were denied on the basis of laches, meaning the Native American petitioners waited too long to pursue their rights. The Supreme Court likewise denied certiorari, choosing not to hear the case.

While the Harjo case was still being litigated, a second set of Native Americans, led by Amanda Blackhorse, filed a petition in the TTAB seeking to cancel the Team’s marks on the same grounds. After years of litigation, a panel of TTAB judges voted to cancel the team’s six trademarks in a two-to-one decision. The judges held that the marks were disparaging to a “substantial composite of Native Americans” and supported their conclusion with evidence demonstrating the cessation of use of the term “redskins” to refer to Native Americans in the 1960s.

Despite another setback, the Team remained confident that it would prevail on appeal and that the TTAB’s decision would not impact the Team’s use of the marks. Before we continue, let that sink in. The Team was involved in multiple actions involving its use of the marks where the opposing parties and the TTAB believed the marks were racially disparaging, and the team didn’t seem to care. Instead, the Team treated it as nothing more than a nuisance and vowed to appeal and continue using the marks regardless of their disparaging nature. Talk about oblivious.

The Team followed through on its promise. It appealed the TTAB’s decision to the United States District Court for the Eastern District of Virginia and continued using the marks in the interim. On July 8, 2015, the court denied the Team’s motion for summary judgment and granted the Blackhorse defendants’ motion for summary judgment, holding that the “evidence before the Court supports the legal conclusion that . . . the Redskin Marks consisted of matter that ‘may disparage’ a substantial composite of Native Americans.” The Team, once again dissatisfied with the trier of fact’s decision, appealed the matter to the United States Court of Appeals for the Fourth Circuit. But after the Team filed its appeal with the Fourth Circuit, the Supreme Court agreed to hear a case involving the same issue—the constitutionality of the Lanham Act’s disparagement clause.

In Matal v. Tam, the Supreme Court held that the disparagement clause of the Lanham Act violates the First Amendment’s free speech clause. This ruling caused the Fourth Circuit to vacate the lower court’s order and remand the Blackhorse matter for further proceedings, consistent with Tam, since the lower court’s ruling was predicated on the now-unconstitutional disparagement clause. In other words, the Tam decision saved the Washington Redskins franchise from losing its trademarks and left the Blackhorse defendants with nothing to show for their efforts other than knowing that they fought the good fight.

But even in the absence of Tam, I’m almost certain the Team would have continued its use of the marks. After two decades of litigation exhibiting the racist and disparaging nature of the marks, you would think the Team would have voluntarily changed its name. Yet it seems the Team would have continued to use the Marks despite any governmental cancellation of their trademark registrations. They were only willing to discontinue use of the Marks when some of their primary merchandise distributors took a stand and refused to sell the Team’s products. They can spin it however they would like, but the objective evidence indicates that the decision was financially motivated by fear of lost revenue and the impact to its bottom line.

So now that the Team has announced its decision to retire the Redskins name, what will its new name be? Many people expected the Team to announce the new name simultaneously with the decision to retire the other, but that wasn’t the case. Instead, the Team announced that it is working to develop “a new name and design . . . that will enhance the standing of [the Team’s] proud, tradition-rich franchise and inspire [its] sponsors, fans[,] and community for the next 100 years.” That may be true, but there are also rumors that the announcement was delayed, in part, by a trademark troll. For those of you who are unfamiliar with the term, a trademark troll is someone who registers a mark without the intent to use it. Their goal is usually to sell the application/registration to someone who intends to use it or to extort a licensing fee from the would-be user.

The alleged trademark troll, Philip Martin McCaulay, has applied to register various potential marks that the Team could use as its new mascot, including the Washington Redtails, the Washington Monuments, the Washington Veterans, the Washington Red Wolves, and the Washington Warriors. But according to Mr. McCaulay, he’s not looking to profit from his actions. Instead, he claims that he applied to register the marks to prevent any real trademark trolls from withholding use of the marks from the Team. According to Mr. McCaulay, he just “want[s] them to change the name and [is] embarrassed if [he] did anything that slows that down.” He also claims that he offered to remit the pending applications to the Team for free, but hasn’t heard back. The Team hasn’t confirmed the veracity of Mr. McCaulay’s statements, but it’s possible that he’s not a troll at all. He might just be a loyal fan looking to protect his team. For my own curiosity, I hope we find out, but I’m skeptical that we will since the Team would not likely announce paying for the marks

In the meantime, we have no choice but to sit back and wait for the Team to announce its new mascot. I can’t imagine we’ll be waiting too long since the season, if it happens, is right around the corner. As I said to one of my fellow trademark aficionados, although announcing the decision to retire the former name without announcing the new one may come across as defensive and reactionary, it may allow the Team to build positive anticipation of the announcement without as much focus on the shameful precedent mark. That won’t be the case for everyone, as most of us will not forget how we got here, but it might work on the casual observer. Either way, I’m looking forward to the beginning of a new era and a new team name.